UPDATE 5-Rousseff win rattles Brazil markets, focus turns to economy

lunes 27 de octubre de 2014 15:58 GYT

(Adds updated market data, quote from Workers' Party)

By Brad Haynes and Paulo Prada

SAO PAULO Oct 27 (Reuters) - President Dilma Rousseff's narrow re-election victory met with cold reality on Monday as Brazil's financial markets tumbled on doubts that she can restore confidence in the economy and maintain political support in a sharply divided nation.

Rousseff overcame dissatisfaction with a sluggish economy and poor public services to clinch a second term on Sunday by a slim margin, dashing the hopes of investors and nearly half the electorate who bet on her pro-business challenger.

Finance Minister Guido Mantega, whose replacement is the focus of intense speculation, tried to beat back the pessimism with promises to control inflation and close a budget deficit in the four years ahead, although he added that the election showed popular approval for Rousseff's economic policies.

Brazil's currency, the real, extended losses after Mantega's comments, closing at 2.52 per dollar, its weakest level since April 2005.

Rousseff said last month that Mantega would step down at the end of the year, and government sources say her short list of potential replacements includes a businessman, a former finance ministry official and her current chief of staff.

Whoever takes the reins at the finance ministry, investors are skeptical that Rousseff can pull off a swift recovery, or make a dramatic shift toward market-friendly polices, after four years of ineffective industrial measures.

She now faces the challenge of delivering on campaign promises to expand social benefits for the poor while balancing a strained federal budget.   Continuación...